IC-NRLF 


CD 
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A  PLAN 


X  fc, 

GRADUAL  RESUMPTION 


OP 


SPECIE    PAYMENT, 


SUBMITTED  IN  A  LETTER  TO  HON.  R.   C.  SCHENCK. 
CHAIRMAN  COMMITTEE  OF  WAYS  AND  MEANS, 


BY 


R  COWLES, 


EDITOR    CLEVELAND    LEADER. 


SHOWING  HOW  RESUMPTION  CAN  BE  BROUGHT  ABOUT 
WITHOUT  EMBARRASSING  THE  DEBTORS ;  HOW  THE  PA- 
PER CURRENCY  CAN  BE  MADE  PRECISELY  EQUAL  TO 
GOLD  IN  VALUE;  HOW  TO  SUPPLY  BANKS  WITH  THE 
NECESSARY  AMOUNT  OF  COIN  TO  ENABLE  THEM  TO  RE- 
SUME; AND  HOW  THE  GOVERNMENT  CAN  RESUME  AND 
MAINTAIN  SPECIE  PAYMENT. 


CLEVELAND,  0: 

PRINTED  AT  THE  LEADER  JOB  KOOMS,  144  SUPERIOR  STREET. 

1868. 


HON.  ROBERT  C.  SCHENCK, 

Chairman  of  the  Committee  of  Ways  and  Means : 
DEAR  SIR  : 

In  compliance  with  the  request  you  made  last  winter, 
I  write  this  letter  to  you  for  the  purpose  of  submitting 
for  your  consideration  certain  views  in  regard  to  the 
best  and  most  feasible  mode  of  resuming  specie  payments. 
The  plan  I  submit  is  the  result  of  much  study,  and  so  thor- 
oughly am  I  convinced  of  its  entire  feasibility  that  I  cannot 
refrain  from  laying  it  before  you,  even  at  the  hazard  of 
being  deemed  presumptuous  in  attempting  to  master  a  finan- 
cial problem  so  difficult  of  solution. 

My  views  upon  this  subject,  in  the  main,  I  believe  to  be 
original,  and  it  is  not  necessary  to  my  purpose  that  I  should 
criticise  any  of  the  various  plans  of  resumption  heretofore 
submitted  to  Congress  and  rejected  as  impracticable. 

In  the  general  estimation,  the  great  obstacle  to  a  re- 
turn to  specie  payment,  is  the  danger  that  Government 
would  not  be  able  to  maintain  it  with  the  amount  of  gold  it 
now  has  against  the  present  volume  of  paper  currency, 
inasmuch  as  the  banks,  which  control  nine-tenths  of  the 
circulation  of  the  country,  would  be  likely  to  distrust  the 
ability  of  the  Government  to  continue  its  payment  of  coin, 
and,  in  anticipation  of  another  suspension,  obeying  the 
instinct  of  self-preservation,  would  draw  from  the  Treasury 
all  the  specie  they  could,  for  the  purpose  of  substituting  it 
for  their  legal  tender  and  deposit  reserve*  amounting  to  say 
$165,000,000 ;  thus  swamping  the  Treasury  in  the  very 
inception  of  the  purpose. 


3&3260 


Another  difficulty,  so  serious  as  to  create  great  apprehen- 
sion, is,  that  if  banks  wm  compelled  by  law  to  resume  spe- 
cie payment  at  a  a  fixed  date  in  the  future,  say  by  the  first 
of  July,  1869,  as  Mr.  Merrill  proposed,  without  being  fur- 
nished with  the  necessary  amount  of  coin,  they  would  have 
so  little  confidence  in  their,  own  ability  to  meet  the  require- 
ments of  the  law,  that  they  would  at  once  commence  to 
withdraw  their  circulation  in  anticipation  of  the  dreaded  day, 
thus  causing  a  great  scarcity  of  currency  and  wide-spread 
embarrassment  and  disaster  in  commercial  circles.. 

Another  objection  urged  against  a  return  to  specie  pay- 
ment is,  that  the  goods  in  the  warehouses  of  the  importer 
and  jobber,  and  on  the  shelves  of  the  retailer,  would  depreci- 
ate to  gold  values,  subjecting  them  to  a  corresponding  loss. 

Another,  that  whenever  a  financial  revulsion  should  occur 
in  Europe,  we  are  liable  to  have  our  bonds,  now  held  abroad, 
returned  to  us  by  the  tens  of  millions  for  gold,  so  much  so 
as  to  endanger  our  ability  to  maintain  specie  payment. 

And  another,  and  most  serious  objection  is,  that  all 
individual  debts  created  on  a  depreciated  paper  basis,  would 
have  to  be  paid  in  gold,  thus  making  the  amount  due  just 
as  much  more  as  the  premium  on  the  gold  now  is. 

These  impediments,  especially  the  last,  are  deemed  so 
serious  that  it  is  quite  generally  conceded  that  resumption 
must  be  postponed  to  the  indefinite  future,  awaiting,  either 
hoped-for,  but  uncertain,  accumulations  of  gold,  or  se- 
vere contractions  in  the  volume  of  paper  currency — a 
remedy  which  encounters  universal  opposition — or  for  that 
arcadian  time  when  the  generosity  of  banks  will  prevent 
their  troubling  the  Government  for  its  coin.  Procrastina- 
tion alone  will  not  solve  the  problem.  The  perplexi- 
ties besetting  the  question  now  will  continue  to  beset  it  so 
Ions:  as  no  steps  are  taken  to  bring  about  a  safe  resumption 
of  specie  payments.  To  await  the  accumulation  of  $200,- 
000.000  or  more  in  coin  is  a  remedy  too  slow  to  meet  the 
exigencies  of  the  case.  The  cry  of  "  commercial  disaster  and 


ruin,"  consequent  upon  resumption,  will  be  heard  in  the 
future  as  well  as  now,  and  gold  in  the  future  is  likely  to  be 
about  as  high  as  it  is  now.  What  then  is  to  be  gained  by  delay? 
Absolutely  nothing  ;  but,  on  the  other  hand,  it  will  continue 
indefinitely  the  evils  we  are  now  staggering  under,  such 
as  clouding  the  credit  of  the  Government;  causing  our 
bonds  to  be  quoted  abroad  at  about  seventy  cents  on  the 
dollar ;  increasing  the  expense  of  carrying  on  the  Govern" 
nient  by  at  least  $30,000,000  a  year ;  depriving  us  of  a 
currency  with  a  fixed  value,  so  essential  to  enable  the  busi- 
ness man  to  make  reliable  calculations  with  reference  to 
future  operations;  and  lastly,  demoralizing  the  minds  of  many 
with  the  rascally  idea  that  the  people  in  their  collective 
capacity  are  not  bound  by  the  same  rules  of  morality  in  the 
payment  of  debts. as  are  obligatory  upon  individuals. 

The  recent  contraction  policy  of  Mr.  McCulloch  was  a 
most  erroneous  one ;  not  because  contraction  was  not  a  thing 
to  be  desired  at  that  time,  when  our  circulation  was,  includ- 
ing compound  interest  notes,  $210,000,000  greater  than  it  is 
now,  but  by  reason  of  the  particular  plan  adopted.  The 
error  consisted  in  endeavoring  is  force  depreciated  paper  up 
to  par  by  contraction,  without  a  detailed  plan  for  resump- 
tion. In  other  words,  while  the  volume  of  the  currency  was 
being  lessened,  its  value  should  have  appreciated  correspond- 
ingly, and  when  that  appreciation  ceased,  then  contraction 
should  have  ceased  also.  Instead  of  such  a  result,  we  had  a 
contraction  of  $60,000,000,  (saying  nothing  of  the  retirement 
of  compound  interest  notes  to  the  amount  of  over  $150,000,- 
000,)  while  the  depreciation  in  the  currency  continued,  and 
was  even  worse  than  before  the  contraction  policy  was  inau- 
gurated, thus  proving  clearly  that  appreciation  of  the 
currency  cannot  be  attained  without  first  fixing  on  a  plan 
and  a  day  for  resumption. 

The  question  now  presents  itself,  "  How  shall  we  resume 
specie  payments  with  the  present  amount  of  coin  in  the 


6 

Treasury  *"  "  What  plan  can  be  devised  which  will  steer  clear 
of  all  the  obstacles  that  will  be  presented  ?" 

The  answer  is,  we  must  first  prepare  for  resumption  by 
giving  the  debtors  an  opportunity  to  change  their  present 
debts  to  debts  formed  on  a  gold  basis,  which  can  be  done  by 
legalizing  gold  contracts.  Secondly,  place  the  government 
in  a  position  to  obtain  gold  at  all  times,  without  cost  for  pre- 
mium, whenever  it  should  need  it.  Thirdly,  we  must  make 
paper  precisely  equal  in  value  to  gold  all  over  the  land ;  and 
Fourthly,  the  Secretary  of  the  Treasury  should  be  placed  in  a 
position  to  be  able  to  check  any  unusually  great  flow  of  gold 
out  of  the  country  to  pay  for  bonds  sent  home  from  abroad. 

It  will  be  readily  conceded  that  whenever  these  four  prop- 
ositions can  be  carried  out,  the  question  under  consideration 
has  become  susceptible  of  solution.  But  how  can  the  results 
embodied  in  these  four  propositions  be  attained?  I  answer, 
they  can  be  secured  by  the  adoption  of  the  following 
financial  programme : 

1st,  Legalize  Gold  Contracts. 

2d,  Establish,  under  the  direction  and  control  of  a  board 
of  trustees,  to  be  selected  by  the  Secretary  of  the  Treasury 
and  the  banks,  a  Redemption  Bureau  in  the  city  of  New 
York.  Require  national  banks  to  redeem  at  this  Bureau  as 
well  as  at  their  counters  ;  and,  for  this  purpose,  to  keep  on 
deposit  there  say  one-half  of  their  coin  reserve. 

3d,  Let  the  Government  redeem  at  this  Bureau  precisely  as 
banks  are  required  to  do  ;  and  for  that  purpose  let  it  keep  a 
coin  deposit  there,  say,  in  accordance  with  the  table  appended. 

4th,  Let  the  Government  exchange  with  the  banks  $75,- 
000,000  in  coin  for  an  equal  amount  of  legal  tender  notes^ 
which  notes  are  to  be  cancelled  and  retired. 

5th,  National  banks,  in  consideration  of  having  received 
$75,000,000  in  coin  from  the  Government,  shall  be  required 
to  keep  their  deposit  reserve  in  IT.  S.  notes,  (new  notes,  to  be 
in  unbroken  sheets  until  full  resumption,)  for  the  period  of 


one  year  after  full  resumption  by  the  Government,  and  after 
that  period  to  keep  fifty  per  cent  of  their  deposit  reserve 
in  U.  S.  notes. 

6th,  Let  the  Government  issue  immediately  new  notes,  re- 
deemable at  the  rate  of  10  per  cent  per  month,  commencing 
January  1st,  1871,  to  be  exchangeable  as  soon  as  printed  for 
legal  tender  notes,  which  legal  tenders  are  to  be  retired  and 
cancelled.  These  new  notes  to  be  printed  ten  of  each  denom- 
ination on  a  sheet ;  the  first  note  to  read  "  redeemable  on  and 
after  January  1,  1871;"  the  second,  u  redeemable  on  and 
after  February  1, 1871 ;"  the  third,  "redeemable  on  and  after 
March  1,  1871,"  and  so  on  till  each  succeeding  month' up  to 
and  including  October  1, 1871,  is  printed  on  each  succeeding 
note.  These  notes  to  be  perforated  like  postage  stamps  for 
the  purpose  of  easy  separation.  Legal  tenders  to  be  ex- 
changeable for  new  notes,  in  sums  of  ten  dollars  and  the 
multiples  of  ten ;  enabling  one  sheet  of  ones  to  be  exchanged 
for  ten  dollars ;  one  sheet  of  twos  for  twenty  dollars  ;  one 
sheet  of  tens,  or  two  sheets  of  fives,  or  ten  sheets  of  ones  for 
one  hundred  dollars,  and  so  on,  thus  distributing  the  short 
and  long  time  notes  in  equal  proportion. 

7th,  These  new  notes  to  be  legal  tenders  till  full  resump- 
tion takes  place,  but  no  longer, 

8th,  The  new  notes  to  be  receivable  for  taxes  at  all 
times  and  for  customs ......  days  before  becoming  redeemable. 

9th,  National  banks  to  be  required  to  resume  January 
1st,  1871. 

10th,  Authorize  the  Secretary  of  the  Treasury  to  issue  $200,- 

000,000  of  bonds,  payable  in years,  drawing per 

cent. ;  interest  and  principal  on  a  certain  portion  to  be  paya- 
ble in  sterling  in  the  city  of  London ;  on  another  portion  pay- 
able in  thalers  in  the  city  of  Hamburg ;  and  the  balance  pay- 
able in  francs  in  the  city  of  Paris ;  a  small  portion  of  these 
bonds  to  be  deposited  with  a  responsible  house  in  each  of 
those  cities,  according. as  they  are  made  payable,  subject  to 


8 

the  order  of  the  Secretary  of  the  Treasury.  These  bonds 
are  to  be  thrown  on  the  market  whenever  in  the  judgment  of 
the  Secretary  it  may  be  necessary,  and  in  quantity  sufficient 
to  create  the  necessary  amount  of  exchange  on  Europe,  with 
which  to  pay  for  old  bonds  at  ruling  rates,  that  may  be  sent 
home. 

By  carrying  into  operation  the  first  provision,  namely,  legal- 
ising gold  contracts,  every  debtor  has  the  opportunity  till 
October  1st,  1871,  of  paying  off  his  old  debts,  created  on  a 
paper  basis,  in  legal  tender  notes,  and  at  the  same  time  create 
all  his  new  debts  on  a  gold  basis  and  payable  in  gold  or  its 
equivalent  in  legal  tender  notes.  Thus,  when  resumption 
conies  he  will  not  be  embarrassed,  inasmuch  as  he  will  have 
paid  off  all,  or  nearly  all  of  his  old  debts  in  legal  tender,  and 
all  his  new  debts  will  have  been  created  on  a  gold  basis.  This 
will  render  transition  from  depreciated  paper  to  gold  currency 
perfectly  easy  to  at  least  nine-tenths  of  the  debtors.  The  other 
tenth,  having  debts  running  a  longer  period  of  time,  may 
have  to  suffer  some  inconvenience,  but  it  will  be  for  onlv  a 
portion  of  their  indebtedness,  as  a  part  will  have  been  paid 
in  the  interim  in  paper.  It  will  readily  be  seen  that  legali- 
zing gold  contracts  will  smooth  the  way  to  resumption  most 
admirably,  and  it  should  be  done  as  a  primary  measure  by  all 
means. 

Carry  out  the  second  and  third  provisions,  and  U.  S.  notes 
and  National  Bank  currency  become  precisely  the  same  as  gold 
after  full  resumption  ;  if  anything,  better,  on  account  of 
greater  convenience  in  handling.  Exchange  will  rarely  go 
above  par  in  the  States  east  of  the  Rocky  Mountains,  never 
exceed  one-fourth  of  one  per  cent. ,  and  in  some  cases  it  will 
be  below  par.  A  Redemption  Bureau  of  this  kind  would 
operate  precisely  like  a  clearing  house.  Each  bank,  in  order 
to  keep  up  its  balance,  would  send  for  redemption  notes  of 
other  banks,  or  U.  S.  notes,  with  directions  to  pass  proceeds 
to  its  credit.  This  would  in  the  long  run  result  in  exchang- 


ing  notes  with  each  other,  and  paying  whatever  balances  there 
might  be  in  gold.  Whenever  the  Government  needed  the 
gold  to  keep  up  its  balance,  it  would  send  national  currency 
for  redemption  in  the  same  way.  Thus  the  $60,000,000  to 
$80,000,000  of  gold  lying  in  the  vault  of  the  Bureau  would 
remain  comparatively  undisturbed,  its  ownership  changing 
somewhat  from  day  to  day  on  the  books  of  the  Bureau. 
Owing  to  the  truly  national  character  of  bank  money,  it  being 
so  thoroughly  scattered  and  mixed  together  all  over  the 
country,  it  would  be  difficult  to  assort  it,  consequently  no 
run  could  be  made  upon  any  one  bank  at  its  counter  or  at  the 
Bureau.  Whenever  there  was  a  run  it  would  be  on  the  Bu- 
reau, and  it  would  be  borne  alike  by  all  the  banks  and  the 
Government  in  almost  exact  proportion  to  their  circulation. 
Consequently  banks  would  not  undertake  to  run  the  Bureau, 
nor  would  they  attempt  to  run  the  Government  for  its  gold, 
simply  because  the  Government  in  self  defense  would  demand 
of  banks  gold  for  their  notes  lying  in  the  Treasury,  more  or 
less.  Should  the  Government  have  occasion  to  draw  out  an 
unusual  amount  of  gold,  it  would  draw  from  all  the  banks 
alike.  By  making  all  national  banks  redeem  in  New  York, 
their  bills  become  national  in  character,  instead  of  local  as 
was  the  case  with  bank  currency  before  the  war.  Conse- 
quently it  would  be  less  difficult  to  keep  circulation  outstand- 
ing. This  feature  will  commend  itself  to  the  banks.  Owing 
to  the  magnitude  of  the  operation,  no  combination  of  parties, 
outside  of  bank  organizations  and  the  Government,  could 
raise  a  sufficient  amount  of  notes  to  make  disastrous  runs 
upon  the  Bureau.  Government  would  be  able  to  pay  its  coin 
obligations  by  check,  which  would  be  paid  in  gold  or  paper, 
AT  THE  OPTION  OF  THE  HOLDER,  who  would  generally  take 
paper  in  preference  to  gold,  because  more  easily  handled. 

Under  the  fourth  proposition,  the  banks  will  have  furnished 
them  coin  equal  in  amount  to  25  per  cent,  bf  their  circula- 
tion. This,  under  the  present  National  Bank  system,  and 


10 

this  programme  carried  out  fully,  would  be  10  per  cent, 
more  than  necessary  to  enable  them  to  protect  their  circula- 
tion after  confidence  had  been  established.  Therefore  banks 
would  be  abundantly  able  to  carry  out  the  fifth  proposition 
to  aid  the  Government  to  resume  by  keeping  their  deposit  re- 
serve in  legal  tender  notes. 

Under  the  fifth  provision,  the  National  Banks,  in  consider- 
ation of  receiving  so  liberal  a  supply  of  gold  from  the  Gov- 
ernment, would  be  required  to  use  U.  S.  notes,  (new  notes  in 
unbroken  sheets,  till  after  full  resumption,)  for  their  deposit 
reserve,  amounting  to  at  least  $100,000,000,  thus  relieving 
the  Government  from  protecting  that  amount  for  one  year 
after  full  resumption  takes  place,  equal  to  one  year  and  ten 
months  from  commencement  of  resumption  ;  and  giving  it 
ample  time  to  accumulate  gold,  if  necessary,  to  protect  the 
full  amount  of  its  circulation.  After  that  time  good  policy 
and  fairness  would  require  banks  to  keep  50  per  cent,  of  their 
deposit  reserve  in  U.  S.  notes,  inasmuch  as  about  an  equal 
amount  of  National  Bank  notes  would  be  constantly  lying  on 
deposit  in  the  U.  S.  Treasury. 

The  sixth  provision  speaks  for  itself.  Under  it  legal  tender 
and  new  notes  become  equal  to  gold,  less  the  interest  on  the 
time  they  remain  unredeemable,  and  as  the  time  approaches 
for  resumption  to  commence,  they  will  soon  pass  at  par  in 
most  business  transactions.  The  fact  that  the  new  notes 
would  be  legal  tender,  would  about  offset  the  extra  value  of 
national  notes,  caused  by  their  becoming  redeemable  immedi 
ately,  while  legal  tender  is  only  being  gradually  redeemable. 
Redemption  on  this  gradual  plan  is  perfectly  feasible,  and 
Government  could  maintain  it  without  difficulty,  as  the  ap- 
pended table  will  show. 

The  seventh  and  eighth  propositions  require  no  argument. 

Under  the  ninth  provision  banks  would  be  required  to  re- 
sume January  1st,  1871,  the  same  time   that  Government 


11 

commences  gradual  resumption.  This  rather  far-distant  time 
is  set  in  order  to  give  the  debtor  time  to  change  his  debts  cre- 
ated on  paper  basis  to  debts  on  gold  basis,  under  the  act  le- 
galizing gold  contracts  ;  also  for  the  purpose  of  allowing  the 
paper  currency  to  appreciate  so  gradually  as  not  to  disarrange 
commercial  matters,  and  also  to  enable  Government  to  accu- 
mulate more  gold  if  necessary. 

The  eleventh  provision  is  somewhat  original  and  of  great 
magnitude.  It  proposes  a  scheme  to  stop  the  flow  of  gold  to 
Europe  in  case  of  panic  or  revulsion  there.  With  a  skillful 
financial  gentleman  at  the  head  of  the  Treasury  Department, 
with  authority  to  keep  bonds  on  deposit  at  the  principal 
points  in  Europe,  to  be  sold  whenever  he  deems  it  necessary ; 
these  bonds  made  payable  at  those  points  in  gold,  with  the 
facilities  he  would  have  for  being  posted  in  regard  to  the 
amount  of  bonds  being  sent  home,  and  ascertaining  the  point 
least  affected  by  the  revulsion  over  there,  he  could  order  so 
much  of  the  new  bonds  thrown  on  the  market  at  that  point, 
thus  creating  exchange  to  pay  for  all  bonds  sent  home.  With 
the  avails  of  the  sales  of  such  exchange,  he  would  be  required 
to  replace  the  new  bonds  sold  with  old  bonds ;  thus  keeping 
our  bonded  debt  at  same  figures. 

The  fact  of  the  interest  and  principal  of  these  new  bonds 
being  payable  without  doubt  in  gold,  in  the  country  where 
sold,  and  in  the  coin  of  that  country,  would  make  them  ex- 
ceedingly salable,  even  at  a  less  rate  of  interest  than  the 
present  bonds,  especially  so  after  the  resumption  of  specie  pay- 
ment. 

It  will  be  objected  by  some  that  good  policy  forbids  making 
our  bonds  payable  in  Europe.  The  fact  that  the  new  bonds 
were  payable  over  there  would  make  no  difference,  for  the 
gold  would  have  to  be  sent  over,  precisely  the  same  as  if 
they  were  only  held  there,  and  not  payable  there.  Therefore 
the  difference  in  the  two  kinds  of  bonds  in  that  respect 
would  be  just  as  broad  as  it  is  long. 


12 

The  question  now  remains  can  the  Government  resume 
with  the  amount  of  gold  left  after  giving  the  banks  $75,000,- 
000? 

According  to  Treasury  Report  of  March  1st,   1868,   the 
amount  of  legal  tender  notes  and  fractional  currency  out- 
standing is  $387,142,457.     Assuming  that  the  destruction  of 
fractional  currency  from  wear  and  tear,  losses,  and  other 
causes  during  the  ten  years  ending  October  1st,  1872,  (the 
time  for  full  resumption  by  the  Government,  when  banks  will 
only  hold  50  per  cent,  of  their  deposit  reserve  in  legal  tender 
should  amount  to  2J  per  cent,  per  annum,  which  would  be 
25  per  cent,  of  the  total  yearly  average  amount  outstanding ) 
that  the  loss  and  destruction  of  legal  tender  notes  for  the  same 
period,  would  reach  3  per  cent.,  (all  of  which  would  be  clear 
gain  to  the  Government,)  the  amount  of  U.  S.  notes  outstand- 
ing  would  be   reduced   $18,250,000,  or  in  round  numbers 
down  to  $370,000,000,  of  which  amount  $75,000,000   will 
have  been  retired,  it  having  been  received  in  exchange  for 
that  amount  of  gold.     This  would  reduce  the  legal  tender  to 
$295,000,000.     Deduct  $100,000,000  which  the  banks  will 
keep    for    their    deposit    reserve,  and  $195,000,000  besides 
the    gold    certificates,    will   be    all    that   the   Government 
will  have  to  protect.     We  will  assume,   also,  that  during 
the  process  of  gradual  resumption,  an  average  of  about  eighty 
per  cent,  of  the  legal  tender  will  have  been  exchanged  for  the 
new  gold  notes,  and  this  is  a  very  liberal  estimate,  consider- 
ing that  people  will  not  care  about  exchanging   their  legal 
tenders  for  new  notes,  knowing  that  they  can  do  so  at  any 
time.     This  would  require  $156,000,000  of  new  notes,  and 
which  the  Government  would  have  to  protect  at   the  rate  of 
ten  per  cent,  per  month,  for  ten  months  previous  to  full  re- 
sumption. 

The  following  table  will  show  the  amount  redeemable  each 


13 


month  during  the  process  of  this  plan  of  gradual  resumption, 
and  the  necessary  amount  of  specie  to  maintain  it : 


Amount 

New  Notes 
redeemable. 

Per  ct.  coin 
necessary 

Am'tCoin 
necessary. 

15  600  000 

100 

15  600  000 

Fphrnarv    1871  

31  200  000 

80 

24  960  000 

Marph    1871...                     

46  800  000 

65 

30  420  000 

Arml    1871...                                     

62  400  000 

55 

34  320  000 

May  1871   »  

78  000  000 

45 

35  100  000 

June    1871  

93  600  000 

40 

37'440  000 

July  1871  

109  200,000 

35 

38,220  000 

124  800  000 

32 

39,936  000 

140  400  000 

29 

40,716,000 

October  1871  

195  000  000 

25 

48,750,000 

October,  1872,  $50,000,000  legal  tender, 
held  by  banks,  becomes  redeemable 

245,000,000 

20 

49,000,000 

From  the  above  calculation  it  will  be  seen  that  at  the  com- 
mencement of  resumption,  Government  will  need  $15,600,000 
and  banks  $75,000,000,  total  ,$90,600,000,  which  amount  has 
been  held  frequently  by  Government,  independent  of  the  gold 
deposit,  for  which  it  has  given  receipts,  and  independent  of 
the  millions  it  has  sold. 

When  full  resumption  takes  place  the  Government  will 
need  $49,000,000,  banks  $75,000,000,  total  $124,000,000.  That 
amount  has  been  held  by  Government,  and  it  would  had  more 
than  that  now  on  hand,  if  it  had  not  sold  its  gold.  After 
furnishing  the  banks  with  $75,000,000,  and  starting  with 
$15,600,000,  the  Government  would  soon  accumulate  from  its 
custom  receipts  to  reach  $49,000,000,  before  the  year  was 
out.  This  would  be  an  easy  matter  to  accom  plish,  when  it 
is  considered  the  custom  receipts  are  $40,000,000  more  than 
sufficient  to  pay  the  gold  interest,  and  that  the  total  gold  re- 
sources of  the  country  including  California,  would  un- 
doubtedly reach  over  $150,000,000. 

The  next  question  to  be  considered  is,  how  will  the  volume 
of  circulation  after  full  resumption,  October  1, 1871,  compare 
with  the  present  circulation,  which  is  as  follows  : 


14 

Bank  Notes, $300,000,000 

Legal  Tender  and  Fractional  Currency 370,000.000 

Gold  in  Banks  and  Treasury 135,000,000 

$805,000,000 
The  dormant  circulation  is 

Gold $135,000,000 

Legal  Tender  Reserve,  to  redeem  Bank 

Circulation 65,000,000 

200,000,000 

Leaving  for  active  circulation $605,000,000 

• 

After  resumption,  agreeably  to  the  programme  laid  down 
in  this  letter,  the  circulation  would  stand  October  1st,  1871; 
as  follows : 

Bank  Notes, $300,000,000 

Legal  Tender  and  Fractional  Currency 295,000,000 

Gold,  probably. 150,000,000 

$745,000,000 

The  amount  dormant,  will  be  in  Gold 135,000,000 


Leaving  for  active  circulation $610,000,000 

Present  population  of  the  country  is  38,500,000,  which  would 
give  the  present  active  circulation  a  per  capita  of  $15,71. 
Population  October  1st,  1871,  will  be  after  allowing  the  set 
back  of  the  war,  42,000,000,  (vide  Census  Report  estimate.) 
This  would  give  a  per  capita  at  that  time  of  $14,51.  During 
the  war,  the  highest  amount  of  active  circulation  was  $850,- 
000,000,  and  the  currency  using-population,  after  omitting 
the  slave  population  and  about  one-half  of  the  rebel  element, 
amounted  to  26,000,000.  The  per  capita  then  was  $32,69,  or 
about  122  per  cent,  more  than  it  will  be  after  full  resumption. 
Active  circulation  in  1860  was  $300,000,000,  (after  allowing  a 
dormant  circulation  of  $50,000,000  in  gold.)  The  currency- 
using  population  (after  leaving  out  the  slaves,  who  never 
used  money)  was  27,000,000.  This  gave  a  per  capita  of 

$11,11. 

In  view  of  the  fact  that  before  the  war  credit  was  expanded 
at  least  double  what  it  is  now,  that  due-bills  and  orders  on 
stores  were  used  to  a  great  extent,  and  that  $11,11  went  as 
far  then  as  $13  will  after  full  resumption,  that  business  will 
have  increased  in  a  greater  ratio  than  the  population  has;  and 


15 

that  a  greater  extent  of  territory  is  used  now  than  then,  it 
must  be  admitted  that  a  per  capita  active  circulation  of 
$14,51  would  not  be  too  large.  But  granting  that  a'per 
capita  of  $14,51  would  be  too  large,  losses  of  notes  from  wear 
and  tear,  and  the  increase  of  population  would  reduce  the  per 
capita  to  $13,30  by  Oct  1,  1874.  Therefore  a  further  contrac- 
tion cannot  be  necessary,  after  having  retired  $75,000,000 
legal  tender  notes,  and  substituted  that  amount  in  gold. 

In  conclusion,  permit  me  to  say  that  the  necessity  for  a 
plan  and  a  fixed  day  for  resumption  of  specie  payment  is 
more  apparent  than  ever;  the  more  so  by  reason  of  the 
mischievous  discussion  now  being  carried  on  as  to  whether 
our  national  obligations  should  be  paid  in  gold  or  a  depreci- 
ated currency,  or  be  partially  repudiated,  as  President  John- 
son proposed  in  his  last  message. 

I  am,  Very  Truly  Yours, 

E.  COWLES. 


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